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    Home»Bitcoin»Portfolio Strategies for Navigating Volatility
    Bitcoin

    Portfolio Strategies for Navigating Volatility

    March 2, 20265 Mins Read


    Key Takeaways

    • Bitcoin’s price surged to over $100,000.
    • The rally followed Trump’s reelection in 2024.
    • Experts warn of Bitcoin’s volatility.
    • FOMO influenced investor behavior.
    • Caution is advised despite the surge.

    Bitcoin’s price surged to an all-time high in January 2025 and surpassed $100,000 for the first time ever in December 2024, following President Donald Trump’s reelection and triggering FOMO (fear of missing out) among many investors. While the rally has captured widespread attention, experts told Investopedia that the cryptocurrency’s notorious volatility demands caution.

    Instead of chasing short-term gains, financial advisors say it’s important for investors to maintain a disciplined strategy that carefully weighs prospects and risks.

    Bitcoin Reaches New Record High

    Bitcoin reached an all-time high of $108,099 on Jan. 20, 2025. The milestone capped a year of significant developments for the cryptocurrency, including the January 2024 approval of spot Bitcoin exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC), which allowed mainstream investors easier access to the asset through traditional brokerage accounts.

    The roughly 48% surge from prices of about $70,000 before the election came amid investor exuberance over Trump’s crypto-friendly campaign promises, including a pledge to fire then-current SEC Chair Gary Gensler, who had often been critical of cryptocurrencies. Gensler resigned on Jan. 20, 2025, the same day Trump returned to office.

    Trump tapped Paul Atkins, CEO of the consulting firm Patomak Global Partners and a former SEC commissioner, to chair the SEC in his administration. In the years since leaving the SEC, Atkins has argued against too much SEC regulation and has been seen as a crypto advocate.

    Fast Fact

    In addition to Atkins, Trump has added other crypto-friendly personnel to his administration, including venture investor and podcaster David Sacks, whom he named the new “White House A.I. & Crypto Czar.”

    Should You Invest in Bitcoin Now?

    Despite optimism about a crypto-friendly regulatory shift, wealth advisor Peter Hughes, founder of Evolve Investing, said investors need to stay mindful of Bitcoin’s historical volatility.

    “When you see a run-up in Bitcoin like we’ve seen post-election, I get a lot more interest from clients, so what I’ll typically do is show them the drawdown risk,” Hughes said. He pointed to the cryptocurrency’s dramatic decline following its previous peak in November 2021, when prices fell more than 70% over the following year.

    If investors are comfortable with the risk, Hughes suggests allocating no more than 5% of their portfolio to cryptocurrencies, citing studies that indicate a Bitcoin or crypto allocation above 5% increases the volatility of an overall investment portfolio dramatically.

    “When Bitcoin as a percentage of the overall portfolio starts to exceed that 5% threshold, it’s at that point that the portfolio becomes more risky than holding, say, a nearly 100% equity portfolio,” he said.

    For newer investors, Aditi Kapadia, founder of Wealth IQ, suggested starting with small allocations to spot ETFs or regulated platforms as a “prudent” first step. “Regardless of how you invest, maintaining a long-term perspective and keeping emotions in check during volatile periods will be critical to success,” she said.

    What Is Cryptocurrency?

    Cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers.

    What Is Bitcoin?

    Bitcoin is the world’s largest and most well-known cryptocurrency. It is designed to act as money and a form of payment outside the control of any one person, group, or entity, thus removing the need for trusted third-party involvement (e.g., a mint or bank) in financial transactions.

    What’s the Difference Between BTC and BTCUSD?

    BTC is the currency code for the bitcoin, the unit of account of the Bitcoin system.

    BTCUSD is the ticker symbol for Bitcoin and the U.S. dollar exchange rate. BTCUSD is a crypto contract for differences (CFD) because of the presence of Bitcoin as the base currency.

    How Can I Invest in Bitcoin?

    Investing in Bitcoin can seem complicated, but it isn’t. It only requires an account at a service provider or a cryptocurrency exchange and a way to store your purchases safely. Payment methods include bank accounts, debit cards, credit cards, and PayPal. You can also buy Bitcoin at specialized ATMs, peer-to-peer (P2P) exchanges, and brokerages such as Fidelity and Robinhood.

    You can also invest in Bitcoin through exchange-traded funds such as spot Bitcoin ETFs and Bitcoin futures ETFs.

    The Bottom Line

    Investing in Bitcoin after its price increase may be tempting, but investors should stay grounded and remember the cryptocurrency’s volatility. Focus on balancing risk and reward, keeping a long-term perspective, and avoiding impulsive decisions driven by market hype.

    Hughes offered a sobering reality check for investors caught up in the current enthusiasm. “If you’re feeling bullish on bitcoin after this incredible run, how would you react if the price dropped by half?” he said. “Your answer reveals whether you’re truly prepared for cryptocurrency’s inherent volatility.”



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